The International Air Transport Association (IATA) says October marked a further sharp decline in business and other premium ticket travel, with a 6.9% fall over the same month in the previous year.
This follows an 8% fall in September and has brought the year to date total for premium travel to a decline of 1%. Early indications for November point to further large declines in business travel and premium revenues, IATA says in its Premium Traffic Monitor for October, released yesterday.
The Monitor reports premium travel is leading the decline in air transport demand along with air freight. “Travel on economy tickets is also now on a steep decline path but, at 1.8% down on the previous year, is lagging the more economy-sensitive parts of the airline business.
“Business travel in particular is highly geared to economic growth and sectors such as financial services. The near collapse of parts of the banking sector in late-September/October will have cut sharply an important source of business and premium travel. Slumping confidence will have also cut travel from other sectors.”
IATA says the massive adjustments now taking place in banking are reflected in the slump in business travel, with premium travel across the North Atlantic falling 4.6% in October. It had been growing until August.
“With most economic forecasts suggesting that the recession will not bottom out until the middle of next year, further sharp declines in business travel and premium revenues should be expected well into 2009.
The organisation says up until August the impact of slowing and then falling business travel volumes “had been offset to some extent by rising average fares on premium travel.”
Airlines had been seeking to recover higher fuel costs by fuel surcharges and higher fares on this segment of the market, which is usually less price sensitive than economy travel.
“Earlier this year, during which time fuel prices doubled, average premium fares were rising at a rate of around 10%. However, since August average fare levels have fallen to the point in September where they were 5% higher than a year earlier. As a result volume falls have exceeded better yields in the past two months and premium revenues, a key component of net work airlines profitability, are now falling.”
IATA says the weakest major market for premium travel remains within-Europe, which fell over 14% in October. The Europe to Far East premium travel market fell by 7.1% and Pacific travel by11.6%.
“The only bright spots are in the smaller emerging markets and these could reflect the volatility of the data rather than any new positive trend. Routes within and to Africa improved in October as did those associated with the Middle East.
“However, the collapse in commodity prices will put these economies under pressure in 2009 so the outlook for premium travel in these regions is still not good.”